Growth forecast revised upwards from 1.1% earlier estimate

23/01/2018 16:03 AST

The International Monetary Fund has raised its economic growth forecasts for Saudi Arabia as oil prices rise, though the pace of expansion remains below government estimates.

Gross domestic product will likely grow 1.6 percent this year, the IMF said on Monday, compared with an earlier forecast of 1.1 percent. The Washington-based lender also revised its 2019 economic growth forecast to 2.2 percent from 1.6 percent. The government expects GDP to grow 2.7 percent this year.

“While stronger oil prices are helping a recovery in domestic demand in oil exporters, including Saudi Arabia, the fiscal adjustment that is still needed is projected to weigh on growth prospects,” the IMF said in an update to its World Economic Outlook report.

Saudi Arabia’s economy contracted 0.5 percent last year as the kingdom struggled to cope with crude oil prices and spending cuts aimed to lowering its budget deficit. A surge in oil prices to almost $70 a barrel has given a tailwind to the government’s efforts to revive growth.

The government plans to raise public spending to a record in 2018, and King Salman ordered extra pay for government workers this month to help offset the impact of measures such as subsidy cuts and the introduction of value-added taxation.